When liquidity goes, fundamentals endure

Conventional wisdom has it that companies can hide a multitude of sins until the tide goes out – the point at which we find who has been swimming naked, to paraphrase Warren Buffett. But perhaps we’re getting ahead of ourselves. The S&P 500 has contracted by 6.4 per cent since its high-water mark at the beginning of October, but it’s slightly above where it was at the beginning of the year, so our modesty has been preserved, at least for the time being.